What is a fixed rate loan?

Fixed Rate loan terms and conditions

Fixed Rate loan terms and conditions

The fixed rate loan is a popular form of borrowing, for example, for normal rates – or car loans and real estate loans. Each borrower can decide on admission, whether the interest should be fixed for the term, or adjust to the market interest rate variable. The fixed interest loan retains the interest rate agreed upon conclusion of the contract over the entire term. He does not change in any case. This can be an advantage if interest rates rise in the future. If interest rates fall, on the other hand, the borrower may be annoyed. The independence of the current interest rate development offers especially families a safe planning regarding the finances. Each customer receives the fixed interest rate from his bank, so that it is clear when applying for a grant which percentages can be expected.

Loan amount and term with an interest rate

Loan amount and term with an interest rate

For annuity loans, it is common for the interest rate to remain constant over the term. Until the loan has been fully repaid. The borrower benefits from constant spending and of course various collateral in his own planning. If the interest rate level changes, the interest rate on the fixed-rate loan remains the same.

Credit-independent credit equal to fixed-price credit

Credit-independent credit equal to fixed-price credit

Fixed-interest loans are credit-independent loans that offer the same conditions for all customers. Meaning that the interest rate is always the same and is not determined based on the customer’s credit rating. The interest rate is also an advantage for customers who can not put the very best credit rating on the table. This compares to credit-based credit. Here the interest rate is determined, if all necessary data are present in the application. The better the credit rating, the lower the interest rate, which is particularly advantageous given a very good credit rating. However, many customers still opt for a fixed rate loan, even if the credit check is flawless.

By the way, another advantage of fixed-price credits can be found in special repayments, which are not possible for loans without a fixed interest rate. Thus, the customer can repay his debts to the bank earlier, but a prepayment penalty could be incurred.